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What is your understand our political system works? Perhaps something like this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills pass into law. The law are enforced by the courts. Simple as that. However, that’s how it operated in the past. No longer.

The Emergence of Shadow Courts

Today, overseas companies, along with the billionaires behind them, have the power to sue nation states for the regulations they pass, at private courts staffed by corporate lawyers. The cases are held behind closed doors. In contrast to domestic courts, these bodies grant no right of appeal or judicial review. You or I are unable to file a case to them, nor can our government, or even businesses headquartered in this country. Access is granted solely for businesses registered abroad.

When a secret court determines that a legislative action might diminish the corporation’s anticipated profits, it may order damages of hundreds of millions, even billions.

These sums constitute not tangible damages but compensation the arbitrators decide the company could potentially have made. The administration might be compelled to rescind the measure. It becomes deterred from enacting future policies in that area, due to the risk of incurring a lawsuit.

A System Growing Exponentially

Historically high figures of disputes are being filed, as companies take cues from each other, and investment funds bankroll lawsuits for a share of a cut of the takings. The outcome? Sovereignty and democracy are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede domestic law and the choices made by elected bodies is that this provision has been written – without public consent, and frequently under a climate of total confidentiality – within international trade agreements.

A Concrete Case: The UK Coal Mine

Twelve months ago, a conservation group secured a significant win at the high court. The justice determined that schemes to dig the first deep coalmine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have zero effect on national carbon targets. The new government then withdrew the licence the previous administration had granted. Now, this victory is under threat by an foreign court reporting to only the entities bringing the case.

Last August, a corporate entity whose beneficial owners are located in the tax haven lodged a claim against the UK government. Recently a dispute settlement body in the US capital was convened to consider the case.

The company is litigating against the UK for the money it could have earned if the mine had received permission to go ahead. Citizens have little idea how much this could amount to. What legal team is acting on its behalf against the state? A member of parliament, and former attorney-general in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The state makes a decision, the high court validates it, then a international entity contests it through an undemocratic private court, and a elected official acts on its behalf.

A Sanctions Challenge

On the same day that the panel on the coal mine dispute was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are little of the case so far, but it seems likely that he’ll use the ISDS mechanism to challenge the restrictions the UK imposed on him subsequent to the Russian aggression. He has already filed a claim against Luxembourg for this reason, seeking a colossal sum: equivalent to half of nation's yearly income. Part of the legal team on his side? a prominent lawyer, married to the previous PM.

Legal experts believe that the EU’s delay in using frozen state funds as guarantee for its aid for Ukraine arises from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This remarkable, undemocratic power over elected governments may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Escalating Risks

Politicians promised that such things were not possible. Years ago, a former prime minister, advocating for the largest and riskiest of all such treaties, told us: “We’ve signed trade deal after trade deal and we have never seen a issue in the past.” A consultant on this issue described critics of “scaremongering … the fact is, ISDS has little impact on the UK much”. The general impression appeared to be that only poorer nations needed to fear ISDS claims. Cautionary notes that “once firms grasp the influence they’ve been granted, they will shift their focus from the weak nations to the strong ones” were met with widespread derision.

That threat has come to pass. Recently, fossil fuel and extraction companies have initiated a historic level of cases against nations rich and poor, challenging – like the example of the UK mine – state efforts to stop climate breakdown. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP